A research on the innovative product development capability of participation banks

Islamic financial products and services are different due to the irnature, in addition to the legal and regulatory framework, products must comply with the requirements of Islam. Therefore, it becomes more difficult to innovate in Islamic finance. While developing products in Islamic finance, maintaining a balance, complying with Islamic rules, legal regulations and commercial profitability are the main aspects to consider. In this context, participation banks encounter many problems and the desired success in product development is not achieved. The purpose of this research is to determine the risks and obstacles faced by participation banks in the product development process and to question probable reasons. This study explains the findings about the product development processes of the participation banks gathered from the product development department employees, advisory committee members, TKBB related department managers, TKBB advisory board member, BRSA related department managers and independent academicians of the participation banks in Turkey by conducting in-depth interview method. Results are as follows: It is an obvious reluctance about taking risks in senior management of banks and this is one of the main obstacles to the development of original products. Legislative arrangements demanded by participation banks from certain institutions and organizations due to the cyclical situation of the country remain in the background, rapid solutions cannot be produced, which creates an obstacle to the development of certain products. It may be more expensive and riskier to create productsthatcomplywiththerequirements of Islam, and in suchcases, some companies may prefer products that compromise Islamic requirements.